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Practical Income Manual 2023.

7. Financial expenses

Delimitation of deductible or non-deductible financial expenses:

All expenses derived from the use of external financial resources are included to finance the company's activities or its assets. Among others, the following have such consideration:

  • Expenses for discounting bills and financing the company's operating credits.

  • Surcharges for postponement of payment of debts corresponding to the activity.

  • Interest corresponding to deferrals and installments of tax debts, provided they are directly related to the activity and correspond to the year.

  • Tax late payment interest from settlements carried out in verification procedures and those accrued by the suspension of the execution of the contested administrative act (suspensive interest).

    The Supreme Court Ruling no. 1091/2023, of June 24 (Litigation Chamber), relapsed in cassation appeal no. 515/2022 ( RED : STS 3511/2023) has established as an interpretative criterion that the deductibility of tax late payment interest in IS can be extrapolated to Personal Income Tax , in the in case the taxpayer develops an economic activity.

On the contrary, are not considered deductible financial expenses :

  • Those that involve a higher cost of acquiring assets.

  • Those derived from the use of own capital.

Limitation on the deductibility of net financial expenses

The limit on the deductibility of net financial expenses will be the greater of the following amounts:

  1. 30 percent of the operating profit for the year. 

    The operating profit will be determined from the operating result of the profit and loss account for the year determined in accordance with the Commercial Code and other accounting regulations, eliminating the amortization of fixed assets, the allocation of subsidies for non-financial fixed assets and others, the deterioration and results from disposals of fixed assets, concepts that are included in the profit and loss account model. To this result are added the financial income from participations in equity instruments, provided that they correspond to dividends or participation in profits of entities in which, either the percentage of participation, direct or indirect, is at least 5 percent, except that said shares have been acquired with debts whose financial expenses are not deductible. See in this regard article 16 of the LIS .

  2. 1 million euros when the previous limit exceeds one million euros

Up to this amount, that is, up to 1 million euros, the net financial expenses will, in any case, be deductible.

However, when the duration of the activity is less than one year, the amount, in any case, deductible will be the result of multiplying one million euros by the proportion between the duration of the activity in the tax period with respect to the anus.

See the Resolution of July 16, 2012, of the General Directorate of Taxes, in relation to the limitation on the deductibility of financial expenses in the Corporate Tax ( BOE of July 17) .